The scale of investment company consolidation has stepped up this morning after GCP Infrastructure unveiled plans for a three-way merger with stablemate GCP Asset Backed Income and RM Infrastructure Income.

GCP Infrastructure (GCP ), a £1.1bn infrastructure lender, has agreed terms for a combination with GCP Asset Backed Income (GABI ), a £400m debt fund that has struggled in the past year with fund manager departures and a rising number of bad loans.

Under a proposed scheme of reconstruction, GABI’s assets will transfer to GCP, the company liquidated and new shares in GCP issued to GABI investors.

With both closed-end funds trading on wide discounts of over 30% to their net asset value, it is expected the enlarged fund will have a market value of just over £900m.

It will be managed by GCP’s existing investment team of Philip Kent, Ed Simpson and Max Gilbert.

If approved by shareholders, GCP will adopt a sustainability-linked lending strategy, reduce its gearing, or borrowing, by £100m and return a further £100m to shareholders via share buybacks or special dividends.

The move will enable some shareholders, such as wealth managers, to consolidate their holdings in both funds.

A four-year continuation vote will be introduced starting at the annual shareholder meeting in 2028.

Fund manager Gravis has agreed a tiered charge that will see its 0.9% annual management fee fall to 0.8% for net assets over £1.3bn excluding cash.

Separately, RM Infrastructure (RMII ) has confirmed it is also in talks about a merger with GCP Infrastructure that would see its £128m of assets, minus government-backed coronavirus loans, transfer to GCP. The company is also considering one other proposal.  

GCP Infrastructure chairman Andrew Didham said: ‘There has been considerable consolidation amongst investors in investment companies like GCP Infra. With this comes the need for consolidation amongst investment companies, to provide their investors with entities of greater scale, more liquidity and lower ongoing costs.

‘GCP Infra is well placed to drive this consolidation, and the board believes that the GABI scheme and, if progressed, the RM scheme, will deliver improved liquidity in the company’s shares, a lower ongoing charges ratio and a wider pool of potential investors. We expect the enlarged company will be well placed to continue to deliver attractive, long-term risk adjusted returns to shareholders.’